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The Eurozone October 2012 Baron Frankal Director of Strategy New Economy RECENT ECONOMIC CONTEXT UK double dip recession, as global economy stalls… …and outturn worse than BoE forecasts from May 2011 CPI inflation falling - weaker price (energy) pressures… Sectoral output in UK, services bounce back, manufacturing static, construction significant fall… UK goods exports to EU and non-EU countries shows shift to non-EU markets… Debt as a % of GDP 2009/2010 GDP to debt ratios across EU countries… Bank lending conditions Bank lending conditions improving, but… Interest rates on 10 year Government bonds Rising public debt in Advanced Economies, compared with emerging & developing economies (1950-2012) Rise of the BRICS, despite slowdown in output over last two years… The future for the UK, Europe and International Trade Key observations • • • • • • • • • • • A long term project Period of non-convergence masked Inevitability – and pain – of fiscal union Democratic deficit Difficulties of 27 veto players Bloc benefit, even for Greece Protector effect “big boat” Potential catastrophe of exit Sufficient centrifugal forces for survival Difficult to optimise Slow & unsteady Baron Frankal Director of Economic Strategy, New Economy [email protected]
